Apple’s Beats by Dre Deal Might Center on Jimmy Iovine

Because the obvious is rarely good enough for the tech press, tech wonks were left scratching their heads on Thursday, when news that Apple was reportedly in talks to buy headphone company and music-streaming service Beats by Dre for $3.2 billion exploded across Twitter.

Here’s the simple reason: Beats vastly outperforms any of its high-end headphone competitors and launched a music-streaming service that has already achieved a meaningful level of success. The company has amassed an army of loyal celebrity fans across sports and music, effectively anointing an entire class of influencers as (mostly) unofficial brand ambassadors. It’s highly profitable.

Its marquee product, the Beats Studio headphones, were created by legendary record executive Jimmy Iovine and rapper/label head Dr Dre as an answer to the ubiquity of Apple’s iPod earbuds, which they derided as ruining the listening experience. Over the intervening years between the birth of their product and news of the Apple deal, Beats offerings have proliferated and splintered across multiple price points and form factors (ear buds, a portable speaker, collaborations with rappers like Nicki Minaj and designers such as Alexander Wang), and have been in turn criticized as overpriced and tuned to focus too much on bass. They’re rumored to cost as little as $14 to produce, and sell for up to $450 a pair.

In 2013, the company launched Beats Music, a personalized streaming service built around “the sentence,” which offers listeners the ability to select music based off of their location, mood, and current activity.

Some industry observers say that Apple is really keen on acquiring Beats Music as a way of bolstering its streaming services. Apple launched iTunes Radio, a hitherto straightforward product built around celebrity “DJs” and genre playlists, but has been watching Spotify steadily scoop up users who would rather give up ownership of music—that they might have purchased and downloaded in iTunes—for the convenience of a much wider selection that’s readily available on across all their devices. Critics say the deal indicates that Apple has given up on trying to internally come up with a Spotify competitor, which would explain why it would enter into its largest acquisition in company history. (Apple has long struggled with cloud services, and generally does far better with hardware and software than with the Internet.)

Enter a scoop by Buzzfeed’s Peter Lauria, in which sources tell the Web site that the deal in many ways centers on Iovine himself. Iovine, whose career in music spans decades, is seen as somewhat of a sage in the industry. He’s known for a particular look (wire-frame glasses, usually under a baseball cap) and has a quirky, narrative-driven way of presenting a product. He’s probably the closest thing the music industry has to late Apple visionary Steve Jobs, and Apple is said to be extremely interested in bringing him on board in a “creative role.”

“You know that FM radio is still listened to more than anything else? Why is that? They tell you what song comes next,” Iovine said, while laying out the vision for Beats Music in a 2013 WSJ Live interview. “Everyone wants to know what song comes next, and who doesn’t know what song comes next is your friend on Facebook. If he knew what song comes next, he’d be getting $250,000 a night, like David Guetta is to tell you what song comes next.”

You know what else doesn’t do a good job of telling you what song comes next? iTunes.

Iovine is currently the chairman of Universal Music Group’s Geffen/Interscope/A&M labels, a job that he would reportedly leave to join Apple should the deal go through. The news slightly re-focuses the entire narrative of the deal, which now rests on whether or not Iovine is worth a $3.2 billion gamble on Apple’s part. (Of course, Apple can easily afford him. As Marc Andreessen notes, $3.2 billion is merely a few weeks of generated cash for the company.)

In any case, folks involved have stressed that the deal is still in the discussion phase and could fall through, though a YouTube video of Dr Dre celebrating with Tyrese surfaced on Friday. If the deal ends up being signed as reported, the entrepreneur and co-founder of N.W.A. would likely become the first billionaire rapper in history. Maybe then he can put out his years-anticipated album, Detox.